Wednesday 7th Dec 2016 - Logistics Manager

Polarised market

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Over five million square feet of big box building developed before the downturn have now been taken up – so what’s left? Liza Helps investigates.

Space is getting to be an issue in the North West, or more correctly the lack of it. According to DTZ’s latest Property Times report, in absolute terms the North West retains its status as the region with the lowest amount of available Grade A space in the country with just 434,000 sq ft.

Andrew Aherne of Lambert Smith Hampton, comments: “There is a real shortage of available new/modern manufacturing and logistics buildings across virtually all size ranges in the key locations of the North West.

“Over five million sq ft of new speculatively built big box logistics buildings, which were developed prior to the downturn, have now been taken up and there will shortly be no new buildings of 100,000 sq ft and above available in the North West as a whole.”

David Brooks of Jones Lang LaSalle comments: “With the lack of funding for new speculative development remaining tight for the foreseeable future, we envisage that the problem being experienced with the shortage of supply buildings will become more acute.”

Tony O’Keefe of DTZ agrees: “It’s a polarised market, there’s no Grade A space or at least very little and any occupiers’ have got to compromise on quality or location as all the existing kit has gone. Occupiers need to look at the better quality second hand space or they need to go down the land route, either buying or design and build .”

Jones Lang LaSalle’s Daniel Burn says take up in the region has remained flat as supply continues to lag behind demand for property of all sizes. “Over the last six months, the market has remained static at levels significantly below 2010 and 2011 levels, largely because of the on-going supply shortage.”

Julien Kenny-Levick of Colliers International notes: “Supply of large sheds in the region (say in excess of 100,000 sq ft) is severely limited. In terms of Grade A stock there is only one new unit currently available in the North West at present. A further illustration of this point is the fact that there are only 11 units in excess of 100,000 sq ft with 10m plus eaves height available in the North West.”

Generous

Available warehouses include: Liberty Properties’ 102,029 sq ft Matrix Court warehouse in Chester, which is being marketed by Legat Owen, Bolton Birch and Lamont.

The Grade A property has 10m eaves, ten dock and two level loading doors, a 40m deep service yard and generous on-site car parking. It is being marketed at a reduced rent of £3 per sq ft.

While this may be the only Grade A unit over 100,000 sq ft available now, there are three more units being built in the region at Lancashire Business Park.

The 390,000 sq ft scheme by Lancashire County Developments is the largest new industrial and logistics scheme to take place nationwide, since the onset of the economic downturn. However there is some doubt as to whether this could be considered truly speculative.

O’Keefe explains: “Although not ‘speculative development’ (the units have been constructed to replace units following a fire on site in 2011) they will be seen as a litmus test of occupier demand over the coming months.”

Lambert Smith Hampton and Jones Lang LaSalle have been instructed in the marketing of the scheme by Lancashire County Council.

Construction works are well advanced, with the first units to be completed for July/August this year. Two adjoining units of 166,000 sq ft can be combined to provide a cross-dock warehouse of 332,000 sq ft in total, boasting 12m eaves as well as a 50kn/sqm floor loading.

Aherne says: “This is the only new building of that size in the whole of the UK in four years without an occupier being lined up.”

A third unit provides 50,000 sq ft and can be subdivided from 5,000 sq ft. Planning permission has been obtained for a fourth unit of 60,000 sq ft currently available on a build to suit basis. Rents are from £4.75 per sq ft.

Looking at second hand stock O’Keefe says: “Anything half decent and sizeable is few and far between.”

What is available includes the XL Building on Statham Lane in Skelmersdale formerly occupied by Comet. The 471,698 sq ft facility, constructed in 2003, boasts 12.75m eaves with 63 dock level, drive in and scissor lift loading doors. It is sprinklered, heated and lit, and is only one mile from Junction 4 of the M58 motorway. Letting agent is Jones Lang LaSalle.

There is also Property Alliance Group’s MW300 at Stakehill Park totalling 300,000 sq ft boasting 53 dock and three level access doors. It is being marketed by Lambert Smith Hampton.

One other of note is Anglesea Capital’s Onyx 350 the 343,000 sq ft former Hager Meyer warehouse in Runcorn which is being let through Cushman & Wakefield, B8 and Moriarty & Co. The property has 32 dock levellers and is fully fitted and boasts expansion land for up to 130,000 sq ft.

However, Kenny-Levick says: “Demand for this stock remains patchy with many occupiers delaying their property requirements while the economic situation in both the European and Domestic economies is clarified. And although occupier confidence is improving, tenants remain cost conscious hence rental growth is still exceptional and localised. Also, it should be noted that a good proportion of the existing stock is not suitable for the modern end users and therefore occupiers are looking at the built to suit market.”

Unprecedented take-up

Howard George of B8 Real Estate says: “The supply of quality distribution units in the North West has diminished massively over the last couple of years. We have seen take-up at unprecedented levels and the lack of supply of distribution buildings is resulting in increased demand for build to suit, being the only option.”

O’Keefe agrees: “There has been a notable upswing in demand for deliverable sites – a case in point being the Omega scheme in Warrington.”

The site had been idle for ten years although in the last six months has seen a plethora of activity with design and build  deals being completed for Brake Brothers, Travis Perkins, and Hermes.

“These have taken the entire northern element of the site and a further 30 acres is under offer in the southern section, previously zoned for office use.”

Since December Omega Warrington’s (OWL) 575 acre Omega scheme just off junction 8 of the M62 at Warrington, has secured deals totalling over one million sq ft leaving just six acres available for development at Omega North.

Travis Perkins agreed a deal for a freehold turn-key unit comprising 630,000 sq ft on the ground floor, with a further 70,000 sq ft at mezzanine level. Construction is expected to start in mid-2013 and should take about a year.

Parcel delivery company Hermes secured a £17 million design and build  warehousing deal totalling 140,000 sq ft, while grocery and food supplier Brake Bros secured an £18 million deal for a 198,000 sq ft distribution facility on Omega North in December.

Over on the adjacent site, Omega South, Asda is rumoured to be the occupier for a 600,000 sq ft £100 million logistics centre which secured planning recently.

Andrew Sutherland of Miller Developments, a partner of OWL, said: “The level of occupier success we have achieved at Omega North since Christmas is unprecedented throughout not only the North West but the whole of the UK.

“The fact that, subject to planning being granted, we have only two small sites left on Omega North demonstrates that we have now created a major logistics hub in the North West.”

The sites could take units of up to 60,000 sq ft and are available through joint letting agents Jones Lang LaSalle, GVA and Addleshaw Goddard.

It would be good to say there were plenty of sites available for further design and build  development but there is a distinct shortage of these as well.

Howard George of B8 Real Estate notes: “There are no big strategic sites in the North West. There are infill sites up to 50 acre but there needs to be a 4-500 acre site on the motorway.”

The good news says Kenny Levick is that this is something that MIDAS (Manchester’s Inward Investment Agency) is seeking to address when they undertake its Strategic Sites Review which it is just about to start. “The hope is that this will lead to new sites being brought forward which are badly needed.”

Available oven ready or at least soon to be oven ready schemes include DTZ Investment Managers, Canmoor and Strathclyde Pension Fund’s 6 Sixty One site in Bolton, which can take a 530,000 sq ft warehouse with full infrastructure as well as a 2000KVA power supply. Sole letting agent is Savills.

Legal & General Property and joint venture partner developer Barwood have submitted plans for a similar sized scheme in Wigan.

Proposals have been put forward for two single, cross-docked warehouse units of 555,000 sq ft and 100,000 sq ft on a recently acquired 31 acre site on Lockett Road on the South Lancashire Industrial Estate.

The site purchase is thought to be the largest in the North West of England in over 12 months.

Will Edwards, fund manager at Legal & General Property, said: “This transaction provides the Fund with exposure to an attractive distribution development opportunity in a strong location, close to the M6, with little competing supply and considerable demand prospects.”

CBRE acted for LGP and Barwood on the transaction. CBRE, B8 and Moriarty & Co have been appointed as the joint agents on the development which is to be known as M6EPIC.

Then there is Gazeley’s G.Park Liverpool that could deliver up to 425,000 sq ft. It is being marketed by CBRE, Colliers and Jones Lang LaSalle, Marshall and CDP’s 14 acre Gemini 8 site in Warrington could hold up to 250,000 sq ft, while the daddy of them all Kingsway could take 350,000 sq ft.

In Widnes there is Stobart Park which has planning for a one million sq ft warehouse with 40m eaves on the second phase of the development which is available on a build-to-suit basis through letting agents Jones Lang LaSalle and Cushman & Wakefield.

As an added incentive to prospective tenants on the site Stobart is also pushing ahead with a 20Mw biomass plant run on recycled wood.

“To get an idea of the power that it can produce,” says Richard Butcher of Stobart Estates, “Tesco’s current electric needs at the park for its chilled store requires just 2.5MW a year so there is more than enough power to supply potential occupier enquiries.”

Potential savings

Tesco currently occupies a 770,000 sq ft facility which includes a cold store at Stobart Park.

Stobart calculates the potential savings at 35p per sq ft per year by having this green energy supply based on a one million sq ft ambient building that equates to £350,000 a year or £7 million saving in running costs on a 20 year lease.

Stobart Park is part of a larger development in conjunction with Halton Council known as the Mersey Multi Modal Gateway (3MG) that could see the development of up to 3.5 million sq ft of warehousing, 5,000 new jobs and the reclamation of 200 acres of contaminated land.

Prologis has just submitted revised plans for a one million sq ft plus warehouse on an adjacent 79 acre plot. Originally there had been rumours that this development was earmarked for internet retail giant Amazon.

The original scheme was quashed by the High Court following a judicial review called by Hale Bank Parish Council which had stated that Halton Council had not consulted properly.
The effect of that decision is that the council is required to re-assess and re-determine the new application. The submission has been updated with particular regard to environmental considerations, an amended site plan, and noise assessment.

Rob Taylor of Knight Frank says: “Well located sites are likely to be snapped up fast.” Indeed he is marketing a site in Trafford Park which already has interest even though plans have only just been submitted. The proposal by Canmoor will see development of up to up to 300,000 sq ft on a 17 acre site known as Trafford Point. Knight Frank and B8 Real estate are letting agents.